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As debtors you will want to look for an easy solution to the sticky situation you have gotten into - not being able to pay the debt. You and the creditor may come into an agreement over the debt and he will agree to charge off the debt because it has become worthless. It is known as "Specific Charge Off" method.

This method though may put you at ease has issues to be cautious of. When the creditor charges off the debt he is showing a loss in his income tax. This does not mean that the debt is dead and cannot be recovered. He can still recover from you at a later date.

Note that your charged off debt is not "written off" or "cleared off". The creditor or the debt collection agency that bought the charged off debt can actually collect the debt. The creditor may sell the debt to third party collection agencies called Junk Debt Buyers who want to collect the debt at any cost. They buy all rights from the creditors and hence become the new legal owners of the debt. The debt collector now resorts to all and sundry practices to get his meat. However, the debt collector cannot harass you and can be sued under the FDCPA.

Once the debt has been charged off the creditor is required to report to the credit bureau within 90 days of the charged off date.

If possible, work out a deal with the collectors and pay off and get a "paid in full" on the paper. This assures you of a peaceful future. You may have the debt "written off" in case you are unable to pay it. However, if the debt is written off, it will appear as a bad remark on your credit report for seven years.

While negotiating with creditors or debt collectors about charged off accounts:

• Remain calm and composed in case your debt is "charged off"
• Do not give any future commitments that you may not be able to keep
• Negotiate for a small amount to pay every month to keep from being charged off
• Do not give postdated checks
• Do not give your checking account details
• Get everything on paper
• If you are not able to negotiate with one agency, wait for another agency to pick up the debt

You may contact an FDCPA attorney to assess your case and take his help to proceed with legal action

Resource: The Fair Debt Collection Practices Act offers protection from illegal and unethical tactics of the debt collectors. A clear understanding of debt collection laws under the FDCPA will entail you to the power to fight the third party debt collectors.